THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[18:00:02]

WOLF BLITZER, CNN ANCHOR: The Manafort connection. We are also learning more about the investigation of the president's former campaign chairman, his Russia contacts and allegations of collusion. Might his intercepted conversations make the feds more suspicious?

And scolding allies. New revelations about the president's tense phone calls with the Mexican and Australian leaders detailed in leaked transcripts. Mr. Trump bluntly admitting that he doesn't expect one of his top campaign promises to come true.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: We are following breaking news on the special counsel's Trump-Russia investigation.

CNN has confirmed that Robert Mueller has impaneled a grand jury and that grand jury has issued subpoenas in connection with Donald Trump Jr.'s meeting with a Russian lawyer and others last year, this as CNN has learned that Mueller's team is exploring potential financial ties of the president and his associates to Russia, looking into possible crimes, including some that may be unconnected to the presidential election.

Sources say investigators have reviewed financial records related to the president, as well as the Trump Organization, Trump family members and campaign associates.

We are also learning more about the investigation of former Trump campaign chairman Paul Manafort. U.S. officials tell CNN that investigators became more suspicious of Manafort when they found intercepted communications of suspected Russian operatives.

We are told the Russians were discussing efforts to work with Manafort to coordinate information that could hurt Hillary Clinton's campaign.

Also tonight, "The Washington Post" obtaining transcripts of the president's very tense phone calls with the leaders of Mexico and Australia soon after his inauguration. Among other things, he asked the Mexican president to stop publicly refusing to pay for the border wall, even though Mr. Trump admitted he doesn't actually expect Mexico to pay.

This hour, I will get reaction from the former Defense Secretary, the former CIA Director Leon Panetta. He's standing by. And our correspondents and specialists are also standing by.

Pamela, what are you learning about this new grand jury in the Russia investigation?

PAMELA BROWN, CNN JUSTICE CORRESPONDENT: Wolf, we have learned the special counsel has issued grand jury subpoenas related to the Donald Trump Jr. meeting at Trump Tower last June that we've recently learned about.

This is according to a person familiar with the matter. And the subpoenas that have been issued seek both documents and testimony from people involved in that meeting. Just to remind our viewers, people involved in the meeting include, as listed right here, at least eight people we know of.

Don Jr. was in that meeting, Jared Kushner, as well as Paul Manafort, including an attorney from Russia, among others. And the subpoena were issued in recent weeks. And it shows the special counsel probe is beginning to enter a new phase.

Of course, the probe was convened -- the special counsel probe, we should say, was convened in May. And so now Robert Mueller has impaneled a grand jury, we have learned today. We have initially reported -- we recently reported there was a grand jury in Northern Virginia before the special counsel. This does tell us that Mueller is doing things by the book by issuing or impaneling his own grand jury in Washington.

And it shows that he wants to now pull records and ask for testimony as well, Wolf.

BLITZER: Let me get Jeffrey Toobin, legal analyst, into this.

Jeffrey, what does this move mean?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: It means that the investigation is proceeding as a serious, major criminal investigation. This is how prosecutors proceed.

They need to use grand juries to get information, whether through testimony, sworn testimony before the grand jurors or documents subpoenaed from banks, from telephone companies, from individuals. And then, of course, grand juries can return indictments.

There is, of course, no guarantee that this grand jury will return an indictment, but there is no question that there will be no indictments without a grand jury. The fact that there is a grand jury means that this is a serious investigation that is proceeding in the normal fashion.

BLITZER: Jeff, the White House special counsel, Ty Cobb, issued a statement on the report of a new grand jury being impaneled.

Let me read a little bit of that statement. "Grand jury matters are typically secret. The White House favors anything that accelerates the conclusion of his work fairly. The White House is committed to fully cooperating with Mr. Mueller. Former FBI Director James Comey said three times the president is not under investigation. And we have no reason to believe that has changed."

Here's the question. What does this response from the White House special counsel tell you?

[18:05:07]

TOOBIN: Well, it suggests that Ty Cobb may never have met his client, because the first thing that Donald Trump always says about this investigation is that it is phony and that it's fake and that it's not real.

And Ty Cobb is reacting as if this were a normal White House, because that is the traditional response. That's what the Clinton White House did during the Whitewater investigation. That's what the Reagan White House did during the Iran-Contra investigation.

Perhaps it means that there will be a new cooperative attitude, but certainly the president has never made any sort of indication that there is a cooperative attitude in the White House. And we will see which one pays off.

BLITZER: Jeffrey, if the president were to fire Robert Mueller, the special counsel, how would that impact this grand jury?

He has to get someone in the Justice Department to do it. Presumably, he would ask the deputy attorney general, Rod Rosenstein, who is in charge of the investigation. But if someone were to fire Director Mueller, it's unclear to me what would happen, because prosecutors run grand jurors. Grand juries can't operate on their own. If the prosecutor is gone, unless he were replaced, the grand jury presumably would cease to exist anymore.

BLITZER: Jeff Toobin, thanks very much for your analysis.

Pamela is still with us as we dig deeper into the special counsel's investigation and how the feds are following the money.

Our justice correspondent, Evan Perez, also is joining us with more now on the CNN reporting.

But, Pamela, first to you. Tell us what else you are learning. BROWN: We are learning about who has been the focus of the

investigation, my colleague Evan Perez along with Shimon Prokupecz.

We learned, Wolf, that investigators became suspicious last year when they turned up intercepted communications that U.S. intelligence agencies collected among suspected Russian operatives discussing their efforts to work with Paul Manafort, who, as you will recall, served as campaign chairman for three months.

They were discussing in these intercepted communications the coordination of information that could damage Hillary Clinton's election prospects. The U.S. officials we spoke with say the suspected operatives relayed what they claimed to be conversations with Paul Manafort encouraging help from the Russians.

We should point out that they could have been exaggerating, even lying, and his spokesperson, Paul Manafort's spokesperson, also says there was no collusion with the Russians.

But the focus now for investigators is whether Manafort was involved in money laundering or tax violations in his business dealings with pro-Russia parties in Ukraine. And he has also been drawn into a related investigation of his son-in-law's real estate business dealings. But we should also point out he has not been accused of any wrongdoing, Wolf.

BLITZER: Evan, tell us how investigators are now gathering sensitive financial information involving the finances of the president.

EVAN PEREZ, CNN JUSTICE CORRESPONDENT: Well, Wolf, sources tell us that the FBI team that has been doing this investigation has already gathered financial records related to the Trump Organization, as well as Donald Trump himself and those of his family members, including Donald Trump Jr., and those campaign associates that we have heard so much about.

They have combed through the list of special companies and buyers of Trump-branded real estate companies and scrutinize the roster of tenants at Trump Tower. They're going back to more than a half-a- dozen years and they have also looked at the backgrounds of Russian business associates connected to Trump surrounding the 2013 Miss Universe Pageant.

We could not determine, Wolf, whether this review has included the tax returns of the president.

BLITZER: Pamela, how is special counsel Robert Mueller setting up his overall legal team?

BROWN: Since he was appointed last May, he has been quietly gathering a team of more than three dozen attorneys, investigators and other staff in a nondescript office in Washington.

Officials familiar with the probe describe it as a small U.S. attorney's office with FBI agents and prosecutors assigned to separate groups looking into various aspects of this investigation. These include groups of investigators and lawyers focused on Russian collusion and then separately obstruction of justice, as well as investigations focused on Paul Manafort and National Security Adviser Michael Flynn, the former national security adviser, we should say.

And according to a U.S. official briefed on this investigation, some of the investigators have been pulled from field offices across the country to join the Mueller team in Washington. Others have left high-paying jobs at law firms. And many of these investigators have backgrounds in investigating fraud and financial crimes.

All told, about 16 attorneys are part of this probe now.

BLITZER: Interesting.

Very interesting also that the focus seems at least in part to be on finances. So, are investigators still looking into the possibility of collusion and obstruction of justice?

[18:10:05]

PEREZ: Very much so.

As Pam just mentioned, the investigators and the attorneys are split up into groups. Among those groups is one that is focused on the question of obstruction and one that is focused on whether or not there was any illegal coordination with the Russian spy services.

Well, that is very much the question that they want to answer. Here's the thing. What you can do by focusing on the financial crimes, the possible financial crimes and financial aspects of the case is, you can use it as leverage to possibly get people to cooperate and tell you more whether or not there was any illegal coordination with Russians.

BLITZER: What do we know about other possible targets, Evan, of this Russia probe?

PEREZ: We know in addition to Paul Manafort, who is the former campaign chairman, they have also been focused on Michael Flynn, who is a former national security adviser, Wolf.

But Carter Page, who the president himself had named as a national security adviser, he is the one that first drew the attention of investigators because they had a FISA warrant, a secret surveillance warrant, for him as far back as two years. That is much earlier than has been previously reported.

People said it happened last year. We have been told that it actually goes back a couple of years. And so that is what first drew the attention of the investigators.

BLITZER: Are you getting some more, Pamela, White House reaction to all of this?

BROWN: Right. I spoke to the president's attorney Jay Sekulow today, and he

basically said that the special counsel has not reached out to him or anyone else on the president's outside counsel related to any financial documents or anything specific to this probe.

And he said -- he basically said anything outside what the original mission was in terms of Russia collusion during the election is something they would object to.

BLITZER: Pamela Brown, excellent reporting. Evan Perez, thanks so much, and Shimon Prokupecz worked on this as well. Excellent, excellent reporting from CNN.

BROWN: Thank you.

BLITZER: Let's get some reaction to all of the breaking news from the former Defense Secretary, the former CIA Director in the Obama administration Leon Panetta.

Mr. Secretary, thanks for joining us.

LEON PANETTA, FORMER U.S. SECRETARY OF DEFENSE: Nice to be with you, Wolf.

BLITZER: All right, lots to discuss.

As you just heard, CNN has confirmed that the special counsel has issued subpoenas related to the Donald Trump Jr. meeting over at Trump Tower in New York City last summer, this according to a person familiar with the matter. The subpoena seeks both documents and testimony from people involved in the meeting. What does that move mean?

PANETTA: Well, you know, I wouldn't expect any less from Bob Mueller as special counsel.

The order that created Bob Mueller basically said that he has the authority to investigate any and all matters that directly result from the investigation that he's conducting. And so that is what he is doing. He is going after every possible indication that there is a potential either crime or collusion or obstruction of justice that might be involved.

I think, looking at that meeting, looking at what went on in that meeting and what the results of that meeting were is part and parcel of his broader investigation. I think he is doing the right thing.

BLITZER: Federal investigators, Mr. Secretary, they have also seized on Donald Trump and his associates' financial ties to Russia as one of the most fertile avenues supposedly for moving their probe forward.

President Trump had said looking into his finances could be a red line for him. Do you think this could cause him actually to go ahead and fire Robert Mueller?

PANETTA: You know, I can't understand how the president would assume that somehow his finances could be separated from an investigation into this whole Russian issue.

The money is part and parcel of that investigation. And I think Bob Mueller is going to follow the money in terms of whether or not it leads to a possibility of collusion as a result of that or possible blackmail.

There are all kinds of ways this is tied to the larger investigation. I think the president would have a difficult time justifying that somehow a red line has been crossed. That red line, frankly, was crossed a long time ago, because the reality is that there are a lot of financial issues that are involved in this entire investigation.

And it is legitimate for Bob Mueller to look at all of that.

BLITZER: If the president were to fire Robert Mueller, how would that impact this new grand jury?

PANETTA: I think it would be a very serious step for the president to take, not only in terms of possibly raising further issues related to obstruction of justice, similar to the firing of FBI director raised those same issues.

[18:15:05]

But in addition to that, it is clear that the Congress has raised a number of stop signs saying, don't do this. If necessary, if you take this step, we will likely empower the special counsel to proceed under any event.

So, I don't think it would be a very smart move to do this at this point. I think it would be much better to do what the lawyers said today, which is to fully cooperate with this investigation.

BLITZER: Yes, that's what Ty Cobb, the special counsel of the president in the White House, said.

Investigators at the same time, we're told they have combed through the list of what are described as shell companies and buyers of Trump- branded real estate properties. They have scrutinized the roster of tenants over at Trump Tower in New York City, reaching back several years.

How could that factor into this investigation?

PANETTA: Well, look, there's just no question here, Wolf, that there are a lot of financial ties here that go back to Russia in very different ways, whether it's investment in properties, whether it's dealing with people who are associated with Mr. Trump, or Mr. Trump directly.

And so the money issues are directly involved in trying to determine whether or not that money was used in order to influence what happened during the election or whether it was used to blackmail people within the administration or whether it was used in some kind of other criminal ways. It is just part and parcel of the investigation that needs to be

conducted, because it's obvious that it has a relationship to the fundamental investigation on the Russian issue.

BLITZER: CNN's sources are also telling us that investigators became suspicious when they turned up what are described as intercepted communications of Russians discussing efforts to work with Paul Manafort, the former Trump campaign chairman, to coordinate information that could damage Hillary Clinton. What could this lead to?

PANETTA: Well, again, it's pretty obvious that Paul Manafort had a number of financial relationships, both with the Russians and other countries in that area, and that, as a result of that, he could very well have been subjected to efforts to try to have him influence what happened during the course of the campaign.

That has to be fully investigated. So I think it is proper for the special counsel to look at those kinds of conversations and to determine whether or not they lead to evidence of collusion.

BLITZER: Yes, he had very close financial and very lucrative financial relationships with pro-Russian elements in neighboring Ukraine.

Mr. Secretary, CNN could not determine if this new review includes Donald Trump's tax returns. Do you think that it is possible that the feds could get access to the president's taxes actually without his knowledge?

PANETTA: I think there is no question that, at some point -- and I don't know when that point arrives -- but that having convened a grand jury, and the grand jury has the power to subpoena and the power to get testimony on a number of issues associated with this investigation, that at some point, the issue of Donald Trump's tax reports are going to be looked at one way or the other.

BLITZER: Mr. Secretary, I want you to stand by. We have more breaking news coming into THE SITUATION ROOM, the Trump team's reaction to the new grand jury, as well as new details of the president's phone conversations with key allies.

We will take a quick break, resume our special coverage right after this.

(COMMERCIAL BREAK)

[18:23:29]

BLITZER: We are back with former Defense Secretary Leon Panetta. We're following lots of breaking news in the Trump-Russia Investigation.

CNN has confirmed that a grand jury impaneled by the special counsel, Robert Mueller, has issued subpoenas related to Donald Trump Jr.'s now famous Russia meeting last year at Trump Tower in New York City. Mr. Secretary, we're going to talk more about that in just a moment.

But right now, I want to go to our senior White House correspondent, Jim Acosta. He's over at the White House.

Jim, the president's lawyer is now responding to these breaking stories.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: That's right, Wolf. They would like this wrapped up quickly over here at the White House. I'm not sure they are going to get their wish on that.

The president was asked about this grand jury being impaneled as he was leaving the White House for a political rally in West Virginia. He did not comment. But the president's special counsel here at the White House, Ty Cobb, did release a statement to reporters.

And we can put this up on screen. It essentially say that they were I guess somewhat caught off-guard that this became public. "Grand jury matters are typically secret. The White House favors anything that accelerates the conclusion of his work fairly quickly."

Talk about Robert Mueller there, the special counsel: "The White House is committed to fully cooperating with Mr. Mueller. Former FBI Director Jim Comey said three times the president is not under investigation. And we have no reason to believe that that has changed."

So, Wolf, that is essentially all that they are saying at this point, although we should add that the president has repeatedly called the Russia probe a witch-hunt. And so we can't rule out the possibility that he may comment on all this later on tonight.

[18:25:03]

BLITZER: We will see soon enough.

Jim, all of this is playing out only hours after "The Washington Post" published leaked transcripts of the president's phone calls with the leaders of Mexico and Australia. Tell us about that.

ACOSTA: That's right.

Well, the White House, Wolf, they won't confirm or deny the authenticity of what they're calling allegedly leaked classified documents. But, clearly, the transcripts from these phone calls are a big concern for the president who promised time and again that Mexico would pay for a wall, a promise at this point the president appears to be prepared to break.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Who is going to pay for the wall?

AUDIENCE: Mexico! TRUMP: Who?

AUDIENCE: Mexico!

ACOSTA (voice-over): It was a key campaign promise pushed by then candidate Donald Trump time and again, not just a wall on the border with Mexico, but a wall that Mexico that fully fund.

TRUMP: We are going to build a big, beautiful wall, a big, beautiful wall. And we are going to have a door in the wall and people are going to come into our country. But what are they going to do? They are going to come in legally. Who is going to pay for the wall? Who's going to pay for that wall?

AUDIENCE: Mexico! Mexico!

TRUMP: Who is going to pay for that wall?

AUDIENCE: Mexico!

ACOSTA: But in transcripts of President Trump's January phone call with Mexican President Enrique Pena Nieto obtained by "The Washington Post," it is clear there are cracks in that promise of a wall.

In the call Mr. Trump says, "If you are going to say that Mexico is not going to pay for the wall then I do not want to meet with you guys anymore, because I cannot live with that. I am willing to say that we will work it out. But that means it will come out in a wash, and that is OK. Believe it or not, this is the least important thing that we are talking about, but politically this might be the most important."

Pena Nieto stood firm saying: "But my position has been and will continue to be very firm, saying that Mexico cannot pay for that wall."

The president's response: "But you cannot say that to the press. The press is going to go with that, and I cannot live with that. You cannot say that to the press because I cannot negotiate under those circumstances."

The president also appears to chalk up his victory in the New Hampshire primary to the state's opioid drug crisis. Mr. Trump tells the Mexican president: "I won New Hampshire because New Hampshire is a drug-infested den."

That comment drew bipartisan criticism from New Hampshire officials, with the state's GOP governor saying: "The president is wrong. It's disappointing his mischaracterization of this epidemic ignores the great things the state has to offer."

Democratic Senator Maggie Hassan was even tougher.

SEN. MAGGIE HASSAN (D), NEW HAMPSHIRE: His words were disgusting. They're an outrage. And my message really is this. He should stop insulting people and instead work with us to get the resources to our state and states all around the country who are also challenged by this epidemic.

ACOSTA: Another leaked transcript comes from the president's call with the Australian prime minister that reveals two leaders bickering over an Obama administration plan to welcome refugees from Australia.

During the conversation, the president says he had a much friendlier call earlier in the day with Russia's Vladimir Putin. "It is an embarrassment to the United States of America. And you can say it just the way I said it. I will say it just that way. As far as I'm concerned, that is enough, Malcolm. I have had it. I have been making these calls all day and that is the most unpleasant call all day. Putin was a pleasant call. This is ridiculous."

The president had said that any reports of a testy call were fake news. The tense exchange leaked earlier this year made a splash on "Saturday Night Live."

ALEC BALDWIN, ACTOR: I'm tired and cranky and I feel like I could just freak out on somebody.

ACOSTA: Now, as we mentioned, the president is on his way to a political rally in West Virginia. A spokesman for the White House was asked about these transcripts that were leaked to "The Washington Post" earlier today.

Wolf, we can tell you the spokeswoman did not want to comment on whether or not these were in fact authentic documents, saying they don't comment on the transcripts of the calls, although the spokeswoman did reiterate that the opioid crisis remains a priority for this president.

They do appear to be sensitive to the notion that perhaps the president was trying to at least exploit that crisis in order to earn some political points up there in New Hampshire, Wolf.

BLITZER: Jim Acosta at the White House for us, thanks very much.

Let's bring back Leon Panetta, the former defense secretary, former CIA director.

Mr. Secretary, during the president's call with the Australian prime minister, you just heard the president also said that the prime minister -- told the prime minister that -- quote -- "Putin was a pleasant call. This is ridiculous," referring to his call with the Australian leader.

What does this tell you about the president's approach to the Russian president?

PANETTA: Well, the fundamental problem here is that presidents should say the same thing both to the American people and to world leaders.

And that obviously is a reflection that he was saying something very different. And that's a problem. That's a problem in terms of preparation for the president for those calls.

[18:30:23] But it's also clear that, you know, from his own comments that he had a much more pleasant conversation with Putin than he did with some of our allies, which again sends a message that the president was somehow trying to develop a warmer relationship with Putin than he was with our allies, which is not, frankly, in the interests of the United States in terms of our national security.

BLITZER: What does it say to you, the fact that the transcripts of these phone conversations were leaked to "The Washington Post"? And I'm sure they were classified.

How much does the president need to have candid conversations with world leaders without those world leaders being afraid the transcripts would show up in "The Washington Post" or other publications? This is a serious development. And you're a former CIA director.

PANETTA: I'm very concerned about leaks like that that take place, because those conversations should be able to occur between the president and those leaders. He ought to be able to have some room to make the kind of comments that he needs to make without it splashing all over the news.

So I'd be very concerned that those kinds of leaks are taking place in this administration. And it just means that John Kelly, as chief of staff, has his work cut out for him in terms of changing the atmosphere of the White House so that whoever within the White House or the administration feels free to leak that kind of information would have at least a little more loyalty to both the president and to the administration.

BLITZER: I know that a White House chief of staff, General Kelly, when you were defense secretary he worked directly with you. Right? I assume you have high regard for him?

PANETTA: I do. John Kelly is a good friend, somebody who worked for me as military aid for almost two years when I was secretary of defense. He's a tough Marine, believes in discipline, believes in a strong chain of command, believes in an orderly process, hates chaos. So he's got his work cut out for him in terms of improving the operation of the White House. I hope the president supports him in that effort.

BLITZER: Let's talk about a tweet that the president posted earlier today. And I'll put it up on the screen. He wrote this. He said, "Our relationship with Russia is at an all-time and very dangerous low. You can thank Congress, the same people that can't even give us health care."

He's blaming Congress for this bad relationship right now with Russia. He's not blaming the Russians; he's not blaming Putin. What do you think about that?

PANETTA: Well, you know, I think the president has a continuing problem where everything that goes wrong he has to blame on somebody else, whether it's the Congress or news media or whatever. He's always got to blame somebody else.

I think it's time for the president to take some responsibility here, particularly in dealing with the Russians. I think he sent mixed messages in dealing with the Russians from the very beginning. His Putin call was kind of an example of that.

There was a lot of concern, after we found out what the Russians did in the last election, that the administration and the president did not condemn strongly enough what the Russians were trying to do. I think Congress, as a result of that, felt like the president was simply not leading when it came to confronting the Russians and taking the steps that were necessary to say to the Russians, "Don't ever do it again."

So the reality is here that the president bears some responsibility for what Congress ultimately did. It would have been better had the president and the Congress worked together on this issue, but the fact that the Congress took that step was a reflection that they were very concerned that we were not being strong enough in opposing Russia on these issues.

BLITZER: Mr. Secretary, thanks for joining us.

PANETTA: Good to be with you, Wolf.

BLITZER: The breaking news continues here in THE SITUATION ROOM. We're going to get more on the new grand jury that is now part of the special counsel's Russia investigation, with subpoenas already issued.

Plus what CNN has learned about a potentially critical new development in the probe. Investigators are now looking at possible Trump financial ties to Russia.

(COMMERCIAL BREAK)

[18:39:41] BLITZER: Breaking tonight, a significant new step in the special counsel's Russia investigation. CNN has confirmed that a new grand jury has issued subpoenas related to that controversial 2016 meeting at Trump Tower involving Donald Trump Jr. and a Russian lawyer, as well as the president's son-in-law, Jared Kushner, and his former campaign manager -- campaign chairman, I should say -- Paul Manafort.

There's a lot to discuss with our correspondents, analysts and specialists.

It's a significant move, Dana. What does it say to you, the fact that there is now this new grand jury, and subpoenas related to that meeting have now been issued?

DANA BASH, CNN CHIEF POLITICAL CORRESPONDENT: Well, the grand jury, and I will defer to the legal expert on the panel. But that's not a surprise, given the scope of this investigation. It was just a matter of when, not a matter of if.

The fact that he already sent subpoenas, though, that the grand jury sent subpoenas for information about that July -- June 2016 meeting when the special counsel and his team apparently didn't even know about it, according to CNN's reporting, until the e-mails became public less than a month ago, that seems to me like pretty fast that they got on this issue.

BASH: We reported it here on CNN, as well, that the special counsel has told everybody at the White House don't through anything out even remotely related to this. But the fact that they want everything pretty quickly tells you that this may be the most direct link, potential link to the core of what the mission is supposed to, be which is was there collusion between the Trump orbit and the Russian government or people affiliated with the Russian government?

BLITZER: Richard Ben-Veniste, you were a special prosecutor on the Watergate task force. You're now a CNN contributor. How would this grand jury now work? Walk us through what apparently is going on related to documents and testimony.

RICHARD BEN-VENISTE, CNN LEGAL ANALYST: Federal prosecutors use the grand jury to obtain evidence. They can issue subpoenas for documents, and they can issue subpoenas for producing live testimony before the grand jury, under oath, which are all transcribed. So that's how an investigation is conducted. You get it all under oath. You get it all transcribed. You get the documents, and you review them, and you start questioning people around the transaction.

So it is not likely to get the top of the food chain at the beginning of the investigation. You work your way up is the normal way to do it. It is not at all surprising that we've reached a phase involving the grand jury.

So there are many, many leads for Mr. Mueller to find -- to follow. And one of those, of course, is the intercepts by U.S. government, NSA in particular, of Russians talking to Russians, which will give you a road map of who to talk to and what to investigate.

BLITZER: There's a lot to -- and I know he's put together, Mueller, an excellent team of experienced prosecutors and attorneys.

You know, Mark Preston, the White House special counsel, Ty Cobb, he issued this statement -- let me read part of it -- in response to all these reports. "Grand jury matters are typically secret. The White House favors anything that accelerates the conclusion of his work fairly. The White House is committed to fully cooperating with Mr. Mueller. Former FBI Director James Comey said three times the president is not under investigation, and we have no reason to believe that has changed."

So what does that response from the White House tell you?

MARK PRESTON, CNN POLITICAL ANALYST: Well, a couple things. Let's get here to the response from his client, President Trump. Very confident, very straightforward and very willing to appear to want to work and try to get this over with.

Now, in contrast, you look at how President Trump has addressed this. He has threatened that this investigation needs to end. He has called it fake over and over. He's called it a witch hunt. And quite frankly, he has taunted the investigators, including Special Counsel Mueller to not do the investigation.

Clearly, he is doing the right thing there for his client to at least try to show that they're trying to cooperate. Now whether they are behind the scenes, who knows? But if I was in trouble, I would want him representing me. I would not want Donald Trump as my spokesperson.

BLITZER: You know, Bianna, I want you to listen -- I want you to listen to this, because as you know, CNN is now reporting that federal investigators have seized on Donald Trump and his associate's financial ties to Russia as one of the most fertile avenues, potentially, for their probe. I want you to listen to the president, his exchange he had with journalists at "The New York Times." This is two weeks ago on his thoughts about Robert Mueller looking into his finances. Listen to this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: If Mueller was looking at your finances and your family's finances, unrelated to Russia, is that a red line?

MAGGIE HABERMAN, CORRESPONDENT, "NEW YORK TIMES": Would that be a breach of what his actual charge is?

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I would say yes. Yes, I would say yes. By the way, I would say, I don't -- I mean, it's possible there's a condo or something. You know, I sell a lot of condo units and if somebody from Russia buys a condo, who knows? I don't make money from Russia. In fact, I put out a letter saying that I don't make -- from one of the most highly-respected law firms and accounting firms. I don't have buildings in Russia. They said I own buildings in Russia. I don't. They said I made money from Russia. It's not my thing. I don't -- I don't do that. Over the years I've looked at maybe doing a deal in Russia, but I never did one. Other than the Miss Universe pageant.

(END AUDIO CLIP)

WOLF BLITZER, CNN HOST: All right. So, Bianna, given the fact now based on all of our reporting that Mueller and his team, they are looking into Trump-related finances, could that be a red line for the president? Could that lead to him firing Robert Mueller?

BIANNA GOLODRYGA, YAHOO NEWS AND FINANCE ANCHOR: I think that is why you see a bipartisan effort to prevent that thing from taking place. What we are seeing is democracy at work. One could say that President Trump is perhaps envious of Vladimir Putin because you see even in the tweet today that he sent out he still seems to blame Congress and fake media as opposed to Russians.

Now, if this were happening in Russia, yes, Vladimir Putin could put an end to this. But we see from Republicans now in the Senate and in Congress speaking loudly, saying the reason we are here is not because of us or the media but because of Vladimir Putin. And so, for the president to continue down this road, he is only digging himself into a deeper hole.

What I will say and interesting observation we've really focused on the deterioration of the U.S./Russia relationship. We saw the Prime Minister Medvedev putting out statements yesterday, saying that this president has been humiliated, saying that he's been weak. I think we are seeing Vladimir Putin throwing President Trump a life line right now, because these comments are not coming from Vladimir Putin. They are coming from a very humiliated, let's be honest, Prime Minister Medvedev.

I think we are seeing President Putin giving this president some time but clearly is feeling extra pressure and he's having to answer to senators at home saying we don't work for you. We work for the Americans.

BLITZER: Interesting.

You know, Rebecca Berg, in response to the CNN reporting that all of our viewers have now just heard, the president's personal attorney, Jay Sekulow, issued this statement.

President's outside counsel has not received requests for documentation or information about this. Any inquiry beyond the mandate specified in the appointment we would object to.

What do you make of that response?

REBECCA BERG, CNN POLITICAL ANALYST: Well, the question, of course, is what do you mean by they would object, Wolf? Would they actually move via the president to fire Robert Mueller as has been the fear of many Democrats and some Republicans or would they simply be frustrated? Because let's be honest, a special prosecutor can do whatever a special prosecutor wants to do.

That's one of the reasons it's such a problem potentially for President Trump because Mueller doesn't have to stop with his initial charge. He follows this wherever it leads. And if he ends up in a slightly different direction, that's completely appropriate based on what a special prosecutor is able to do.

So, I should note that Jay Sekulow also said on FOX this evening, the president is not thinking about firing Robert Mueller. So, speculation that's out there is just incorrect. Obviously, that can change at any moment, though, which is why we are seeing senators on the Hill from both parties looking at trying to protect him in some way.

DANA BASH, CNN CHIEF POLITICAL CORRESPONDENT: That's right. I just came from the Hill. I did a joint interview with Senators Susan Collins and Lisa Murkowski, the two Republicans who were consistently against health care, but, of course, asked about this. And both of them, especially Susan Collins, who's on the Intelligence Committee investigating these issues, said that the special counsel should take every lead and follow them where they may go, especially and including financial issues.

And I said, well, the president thinks that that's a red line and she laughed. She said the president doesn't get to tell the special prosecutor -- special counsel what the red line is.

RICHARD BEN-VENISTE, FORMER WATERGATE SPECIAL PROSECUTOR: And, in fact, the order under which Mueller is appointed specifically allows him to pursue leads that result from his investigation. And quite clearly it's not just the financial ties, it is whether other crimes have been committed involving finances. So, the possibility of money laundering, of Foreign Corrupt Practices Act violations and a variety of other regulations associated with money crossing borders would all be within Mueller's appropriate discretion to follow.

BERG: And indeed, a number of people who he has brought on to his team have specialized in their careers in that sort of thing.

BEN-VENISTE: Right.

BLITZER: You know, it's interesting, Mark, that investigators now say that, at least they tell us, that they became suspicious when the U.S. intelligence community intercepted conversations from Russians talking about Paul Manafort who was the campaign chairman, the Trump campaign chairman, and they were saying how they wanted to work with them to get information that would hurt Hillary Clinton's campaign and they are pursuing that.

MARK PRESTON, CNN SENIOR POLITICAL ANALSYT: Right. And as we saw with this great reporting today from Evan Perez and Shimon, the bottom line is that Manafort has a history of working with pro-Russian parties, right?

[18:50:01] I mean, this isn't too surprising, I think. I think we're waiting for the other shoe to drop so (AUDIO GAP) another thread, Wolf, (AUDIO GAP) we're going to see investigators follow. And the fact of the matter is, perhaps we never would have gone down this road had President Trump not taunted everybody along the way.

BLITZER: It will be interesting, Bianna, where the time line those intercepted conversations involving Paul Manafort happened, before or after that June meeting, that controversial meeting at Trump Tower. We don't know.

GOLODRYGA: And herein lies the credibility problem that not only this president but everybody around him and his campaign and even those close to him in this administration now face because time and time again, they repeatedly said we haven't met with any Russians. We didn't know about this person. We didn't know about such meeting, such meeting was about Russian adoption, and we're finding out more and more details, not because they're being forthcoming but because we're hearing from other people either leaking to the media or what have you.

So, that makes a much more of a complicated situation for the president.

BLITZER: Yes, it was interesting. Phil Mudd told us earlier what we know, all of us know about this is only a tiny little piece of what the (AUDIO GAP) and the attorneys know.

Just ahead, an insider perspective (AUDIO GAP) against ISIS under the new commander-in-chief, Donald Trump.

(COMMERCIAL BREAK)

[18:55:59] BLITZER: Tonight, a new look inside the accelerating fight against ISIS from the special envoy to the coalition waging war against the terrorists.

Our senior diplomatic correspondent Michelle Kosinski is joining us.

Michelle, you spoke with this key figure in the battle against ISIS. Tell our viewers what you're learning.

MICHELLE KOSINSKI, CNN SENIOR DIPLOMATIC CORRESPONDENT: This administration is showing off some gains in the fight against ISIS, showing the acceleration of the approach, and even setting up something of a comparison to the way things were done under Obama. Still, those who are shaping the strategy are not ready to state that ISIS is in its final state, or that it's finally become as Obama once famously put it, the jayvee team.

But the area the terror group now controls is quickly shrinking. At its peak in 2015, ISIS controlled around 35,000 miles of Syria and Iraq, nearly the size of California. The latest map obtained by CNN shows they have now lost almost 80 percent of it. And nearly a third of that entire loss has happened in the last six months.

BRETT MCGURK, SPECIAL ENVOY FOR THE GLOBAL COALITION TO COUNTER ISIS: Well, it has accelerated. President Trump, a very significant decision he made was to delegate really tactical authority to decision makers on the ground. So the decision-making cycle has been rapidly shortened and we have been able to really act with dispatch to really surprise ISIS.

KOSINSKI: Special envoy to the coalition against ISIS, Brett McGurk, who began his role on the front lines of coordinating the effort under President Obama, says bold operations now can be put together and executed in a matter of days -- a big change from Obama's highly deliberative approach.

(on camera): How much of a difference would you say it's made?

MCGURK: All I can say is this operation now is moving with effectiveness and efficiency that I've never seen.

KOSINSKI: So, is it safe to say that this is really the end stage of ISIS.

MCGURK: So, I would never say end stage.

KOSINSKI: Why would you not want to say that this is the end of ISIS?

MCGURK: Well, again, these terrorist groups, you know, they can remain in cellular networks, insurgent networks. But what we want to do -- the overall campaign plan is to make sure that these cells can be handled by local actors on the ground. It's a rapidly, rapidly shrinking movement and that for those who made it to Syria, as I mentioned, that they are not going to make it out.

KOSINSKI: International attacks or lone wolf attacks, do you think they're still planning?

MCGURK: At Raqqa, they are now fighting for their own survival. So, they are definitely not planning anything in Raqqa other than how to hold on to the next city block that they're about to lose.

KOSINSKI (voice-over): ISIS leader Abu Bakr al-Baghdadi, last year McGurk thought was probably dead. Now the assumption is he is still alive in deep hiding likely outside Raqqa. But they see no connection anymore between him and ISIS units on the ground.

MCGURK: But don't get me wrong. It's an adapted enemy.

KOSINSKI: How much of ISIS is left? He says today roughly 12,000 fighters down, from a high of around 30,000. The coalition has about 50,000 in Syria alone. It's the flow of foreign fighters in and out is down 90 percent.

(on camera): Are they still coming?

MCGURK: They're really not. And what's interesting is that ISIS's own propaganda now, they used to say everybody come to Syria. Now they're saying -- they're telling people not to come.

KOSINSKI: Where is the place to go now?

MCGURK: Well, Libya was the place and now it's really inhospitable to them. Some of them are trying to get to the Philippines.

KOSINSKI: How many fighters do you think have gotten out total and are now back in their home countries or elsewhere.

MCGURK: 2014 until now it is probably in the low thousands.

KOSINSKI: How big a risk are those fighters today?

MCGURK: Significant risk.

KOSINSKI: Do you think any of them are in the United States?

MCGURK: Returnee fighters from Syria, no.

(END VIDEOTAPE)

KOSINSKI: President Obama's former deputy national security advisor, Tony Blinken, who is also a CNN contributor, responded to this administration's acceleration saying all the gains are the culmination of the comprehensive strategy Obama put in place and implemented. They have done virtually nothing different -- Wolf.